Termination for Default

Third Party Procurement

Frequently Asked Questions

Q. When an A&E firm fails to perform after 18 months on the project, can the Agency select the firm originally ranked number 2 to replace the incumbent or must it conduct a new competition?

A. There is no FTA general policy or rule in this matter. The answer may be dependent on whether the original solicitation set an expiration period for proposals. As a practical matter, you need to consider whether the number 2 offeror’s proposal is still valid because of changed conditions in the 18 months since contract award. It may be wise to carefully review and interview the best responders of the original group to ensure that conditions have not changed to the point that the rankings would have to be revised by the agency (e.g., key personnel, corporate team members, schedules, etc.). Also, since some work has been done by the first A&E firm, it would be prudent to ask the competing firms whether that work could be used by them to reduce the project cost to complete. (Revised: May 2010)

Q. We have been under contract with an A&E firm for Construction Management services for 15 months. Their performance on the job has been poor and the City has been documenting this. We have issued a letter indicating that "failure to perform the duties required by our Agreement will lead to the City declaring that you are in default of your contractual obligations and the City is terminating the Agreement." There is still 12 months remaining on this contract. My question is can we advertise a new RFQ for the remaining work while this A&E is still under contract or must we terminate their contract prior to advertising for a new CM firm.

A. You can advertise for a replacement contract for the remaining work prior to terminating the existing contract. However, should you ultimately choose not to terminate the existing contract, those responding to your solicitation might seek reimbursement for their proposal preparation costs. (Reviewed: May 2010)

Q. What are the consequences if any to a company's ability to bid on FTA funded contracts if any Agency defaults a contractor under an FTA contract? The Agency is considering defaulting an equipment supplier for late delivery.

A. A company that has had a contract terminated for default is not precluded from bidding on or being awarded another contract funded by FTA. However, the awarding agency must always make a determination of responsibility before awarding a contract with FTA funds. Among the issues to be evaluated as part of this determination are: the company's technical and financial resources to perform the contract in a timely manner and its past history of performance. The awarding agency will have to assure itself that the past performance problems have been corrected and are not likely to recur before awarding the new contract. The various criteria to be evaluated in a responsibility determination are discussed in the FTA Circular 4220.1F, Chapter VI, Section 8.b. The Circular is available online. (Posted: June, 2011)